At the same time, we have a special committee of the Commission at the Commissioner level comprised of three Commissioners-Murphy, Walrath, and Brown-dealing with the problem on a day-to-day basis and evaluating complaints. We consider it a priority issue. We are executing maximum effort here, but I would want to point out that the problem doesn't come up with the LCL situation. Senator ALLOTT. What is the LCL? Mr. TUCKER. LCL is less-than-carload lot. The problem we have in the LTL situation-the less-than-truckload lot. The small-shipment problem, unfortunately, relates primarily to the trucking business rather than the LCL railroad business. The lessthan-carload business has just economically dropped off. There isn't much demand for it any more. Senator ALLOTT. Have you received a lot of complaints in this area in the past? Mr. TUCKER. Tremendous amounts, Senator. Mr. TUCKER. That is right, sir. UNAUTHORIZED TRANSPORTATION Senator ALLOTT. There is still talk of unauthorized transportation and its regulation. Could you cite some examples of this and give us some idea of how enforcement in this field works? Mr. TUCKER. May I ask Mr. Foley if he would respond. Did you hear the question, Mr. Foley? Senator ALLOTT. Did you hear it, Mr. Foley? Mr. FOLEY. Yes, sir; I did. The illegal transportation problem is continuing. It is growing. Would the Senator repeat the question, please? Senator ALLOTT. All right. There is sometimes talk of unauthorized transportation-and I presume we are talking chiefly about trucks? Mr. TUCKER. That is right. Senator ALLOTT. And its regulation. Could you cite some examples of this and give us some idea of how enforcement in this field works? Mr. FOLEY. Yes, sir. Good examples of unauthorized transportation are schemes or devices which are used to conceal illegal operations to make them appear to be private carriage or operations which are conducted under one or more of the exemptions in the statute. An example is the so-called leasing of vehicles to shippers by a carrier who holds no authority from the Commission, with long, detailed, complex contracts-leases-which are couched in terms to show that the operation is that of the lessee instead of the lessor. Another example is a buy-and-sell operation in which the carrier, again holding no authority from the Commission, purports to purchase the goods, transport them, and then sell the goods at destinations. The basic purpose of this purchase-and-sale transaction is simply to transport without the benefit of authority from the Commission. Other unlawful operations are conducted under, for example, the farmers' cooperative, the agricultural cooperative exemptions in the law. Senator ALLOTT. Now, just how do they do this, Mr. Foley? Mr. FOLEY. The agricultural cooperative? Senator ALLOTT. You have that cooperative exemption. Now, just how do people go about doing this? 80-124-67—pt. 1- 4 Mr. FOLEY. Some, what we call fly-by-night cooperatives, sir, simply incorporate and claim that they are conducting operations as agricultural cooperatives under the Farmers Marketing Act and governing statutes and simply get into the transportation business. They perhaps may have some farm-related business, whereby they will transport property for the members in outbound movements and then on the return to their origin will transport any freight that they can pick up. There have been a number of cases in which the Commission has considered these operations after investigation by our field staff, and perhaps other staff of the Commission. Certain of those decisions show that the operations are, in fact, unlawful operations. They are not bona fide agricultural cooperative associations and are not, therefore, eligible to conduct the operations under the exemptions. Senator ALLOTT. Now, in such a case what action is taken and who takes it? Mr. FOLEY. The Commission will develop the facts through the field staff and will submit those facts to the Department of Justice for presentation in the courts, either by civil action to restrain and enjoin, or perhaps criminally. On the other hand, we may bring the facts before the Commission in a formal investigation proceeding. The Commission considers the case as the administrative agency, and if the Commission finds these operations are unlawful, it will issue a cease-and-desist order upon which we can then go to court to enforce if it is necessary to do so. Senator ALLOTT. Does the use of a cease-and-desist order usually settler the matter, or do you have to go to court afterward? I mean, what is the general experience? Mr. FOLEY. Well, our experience with cease-and-desist orders has been that we get a cease-and-desist order against one group who have formed a cooperative, and they simply discontinue operating under that particular corporate entity, pull another corporate charter out of their desk drawer and go back in business under another cooperative association arrangement (ostensibly lawfully). Then, of course, we are in the position of having to go back, perhaps reinvestigate and perhaps bring the matter back to the Commission formally again. In some instances we have been fortunate enough to obtain injunctions which are broad enough to run to certain individuals, as well as the corporation, and we have been fortunate enough to have gotten some severe penalties assessed against certain individuals on a second or third offense. Senator ALLOTT. Now, I suppose that most of these complaints originate with what would be otherwise competitive areas, or do they originate solely from the investigations of your field staff. Mr. FOLEY. Basically, the complaints come to us from the regulated segment of the industry. However, our field staff in programs such as the chairman has just indicated, in road checks, develop this information themselves through inspections of the vehicles and interviews of the drivers right on the highways in conjunction with officials of the State with whom we work on our road check programs. Senator ALLOTT. All right. Now we come to the question I wanted to ask. I am not a member of the legislative Commerce Committee, so I am not as knowledgeable in this area as perhaps I ought to be. I am mainly acquainted with my own State, but many States have these various ports of entry and highway check systems. How great is the cooperation with this 29-State agreement you now have which covers illegal operations, doesn't it? Mr. TUCKER. Yes. We think it will substantially improve the situation. Before we could get information from the States, but we couldn't give them information. Under these agreements we can freely exchange information; and the agreements also provide us with a basis of cooperaiton. We have had a great deal of cooperation in many States with State police and highway patrols, and so forth, but this agreement will give us a great improvement and enlargement of that executive area even though the terms may not be specifically set forth, Senator. Senator ALLOTT. Well, I have seen trucks tied up at our various ports in Colorado, and I have also seen trucks stopped on the road for no apparent reason, or no obvious visual reason, let us put it that way, by patrolmen. Now, if these turned into what obviously were interstate violations, then this is turned over to you, and you would take whatever steps you thought were appropriate. I am really trying to get at, I guess, the extent of cooperation over the States as a whole with this illegal operations system. Mr. TUCKER. Perhaps Mr. Foley could give a couple of examples of how the cooperative agreements work. Mr. FOLEY. Yes. As the chairman has indicated, our cooperation with the States is very extensive, and although only a number have formally accepted the terms, we have always worked very closely with the States in conducting investigations on information which the States have furnished us. Just as an example, we have been given a file from Commissioner Murphy asking us to work with the State of Oklahoma in the investigation, not of unlawful operations such as the Senator is talking about, but in connection with the small shipment problem. Complaints have been filed against three substantial freight lines operating through Oklahoma, contending that they are not rendering reasonable and adequate service, and this matter will come before the Commission formally. We have been asked to work with the State of Oklahoma to develop some facts in this particular case. And this is just a typical example. The State will furnish us the information, and we will investigate it. And if the facts warrant some enforcement action, we will bring the matter before the Commission administratively or before the courts for court action. Senator ALLOTT. Well, I assume from what both Mr. Tucker and you have said, then, that in this general area the cooperation and the enforcement provisions are becoming more effective because of the cooperation? Mr. TUCKER. That is right. We feel they are. Senator ALLOTT. Well, gentlemen, I think that is all the questions I have. Do you have any? Mr. TUCKER. We have nothing further, Mr. Chairman. SUBCOMMITTEE RECESS Senator ALLOTT. Thank you very much. We will recess until 2 o'clock. (Whereupon, at 12:05 p.m., the subcommittee was adjourned until 2 p.m. of the same day.) (AFTERNOON SESSION, 2 O'CLOCK, TUESDAY, JUNE 6, 1967) RENEGOTIATION BOARD STATEMENT OF LAWRENCE E. HARTWIG, CHAIRMAN, THE RENEGOTIATION BOARD, ACCOMPANIED BY HERSCHEL C. LOVELESS, THOMAS D'ALESANDRO, JR., WILLIAM M. BURKHALTER, AND JACK BEATY, BOARD MEMBERS; HOWARD W. FENSTERSTOCK, GENERAL COUNSEL; HAROLD E. STONE, DIRECTOR OF ADMINISTRATION; AND MRS. EULIE I. JACKSON, ASSISTANT BUDGET AND FISCAL OFFICER BUDGET ESTIMATE AND HOUSE ALLOWANCE Senator ALLOTT. The subcommittee will come to order. Appearing this afternoon is the Renegotiation Board. The appropriations for 1967 were $2,537,000. The budget estimate is $2.6 million. The House recommended $2.6 million which is $63,000 over the 1967 appropriations. CHAIRMAN'S LETTER In a letter to the chairman you have indicated you are happy with the situation as it is. You probably are the only Federal agency in the United States who is happy at the minute. The letter of Mr. Hartwig, the Chairman, addressed to Chairman Magnuson, and the justification will be placed in the record in full. (The letter and justifications follow :) Hon. WARREN G. MAGNUSON, THE RENEGOTIATION BOARD, Chairman, Subcommittee in charge of the Independent Offices and Department of Housing and Urban Development Appropriation Bill for 1968, U.S. Senate, Washington, D.C. DEAR SENATOR MAGNUSON: Responding to your inquiry dated May 12, 1967, the Renegotiation Board does not recommend any changes in the Independent Offices and Department of Housing and Urban Development appropriation bill for 1968. Sincerely, LAWRENCE E. HARTWIG, Chairman. SALARIES AND EXPENSES For necessary expenses of the Renegotiation Board, including hire of passenger motor vehicles and services as authorized by section 15 of the act of August 2, 1946 (5 U.S.C. 55a), [$2,477,000] $2,600,000. (Act of March 23, 1951, Public Law 82-9, as amended; Independent Offices Appropriation Act, 1967.) Appropriation 1967, $2,477,000; estimate 1968, $2,600,000; proposed supplemental due to pay increase $60,000. JUSTIFICATION FOR INCREASE IN APPROPRIATION The Board's estimated cost for fiscal year 1968 is $2,600,000, as compared with $2,537,000 for fiscal year 1967. The $63,000 increase will be required for 12 addi |